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Monday 07 December, 2009

Gemfields PLC

Annual Financial Report


Gemfields PLC

Final results for the year ended 30 June 2009

7 December 2009

Consolidated financial statements of Gemfields PLC ("Gemfields" or "the
Company"), formerly Gemfields Resources PLC, for the financial year ended 30
June 2009.

Key financial indicators:

  * Revenue from emerald sales of US$815,456 (2008: nil);
   
  * Cash at bank of US$6,868,789 (2008: US$48,078,023);
   
  * Loss for the year of US$201,407,565 (2008: US$30,208,361);
   
  * Result for the period marred by the US$249 million impairment charge
    against the value of the Kagem mine.
   
Key operational developments during the financial year:

  * Ore grade of 349 carats per tonne (2008: 233 carats per tonne);
   
  * 28.0 million carats of total emerald and beryl production (2008: 9.9
    million carats);
   
  * Ongoing reduction in relative costs coupled to increased operating
    efficiencies;
   
  * A focus on mining and selling rough gemstones;
   
  * Option to acquire Oriental Mining S.a.r.l. and its exploration licences in
    Madagascar exercised;
   
  * Appointment of Ian Harebottle as new CEO; and
   
  * Turmoil in the general diamond and gemstone sector, with significant demand
    and price reductions widely reported.
   
Key developments since the end of the period:

  * Two successful rough emerald auctions conducted during July and November
    2009 with sales totalling $US11.5 million;
   
  * The initiation of co-operative global emerald marketing and promotion; and
   
  * Illegal mining activity taking place within the Kagem mining licence area
    being addressed.
   
The Chairman's Statement and the primary financial statements are set out in
the Appendix below. The full financial statements will be sent to shareholders
and they can also be viewed on the Company's website at www.gemfields.co.uk.

Ian Harebottle, CEO of Gemfields, commented:

"The global economic climate prevailing during the year under review was
exceedingly tough on the gemstone and luxury goods sectors, and the impacts
thereof seem likely to continue for some time to come. However, despite these
factors, I am broadly pleased with the way in which Gemfields has managed to
overcome these challenges and with the operational initiatives that have been
put in place.

While there is still a significant amount that remains to be done, we are
fortunate to be supported by a solid team of highly competent and dedicated
people, people who I am very proud to be associated with and who will do
everything possible to ensure that we move towards our goal of becoming the
world's leading premium coloured gemstone company".

Enquiries:

Gemfields richard.james@gemfields.co.uk

Richard James, CFO +44 (0)20 7518 3402

Canaccord Adams Limited

Nominated Adviser and Joint Broker to Gemfields

Mike Jones/Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500

Appendix

Chairman's Statement

Dear Shareholder,

Welcome to the consolidated financial statements of Gemfields PLC ("the
Company"), formerly Gemfields Resources PLC, for the year ended 30 June 2009.

While the early signs of a recovery in the prevailing global economic climate
are noted, there is little doubt that the past year has been a challenging one
and its implications are likely to prevail well into the foreseeable future.

Gemfields, like so many others, has come through the past year stronger in some
areas and less so in others. We are likely to face additional challenges in the
year ahead - some of which have already been identified and are being
addressed, and others which remain uncertain.

I would like to thank each member of our team for their hard work and dedicated
efforts over the past year and also for the added effort that I know they will
be asked to deliver during the coming year. At the same time I would like to
thank you, our loyal shareholders, for your continued support and your
commitment to our vision.

Key financial indicators:

  * Revenue from emerald sales of US$815,456 (2008: nil);
   
  * Cash at bank of US$6,868,789 (2008: US$48,078,023);
   
  * Loss for the year of US$201,407,565 (2008: US$30,208,361);
   
  * Result for the period marred by the US$249 million impairment charge
    against the value of the Kagem mine.
   
Key operational developments during the financial year:

  * Ore grade of 349 carats per tonne (2008: 233 carats per tonne);
   
  * 28.0 million carats of total emerald and beryl production (2008: 9.9
    million carats);
   
  * Ongoing reduction in relative costs coupled to increased operating
    efficiencies;
   
  * A focus on mining and selling rough gemstones;
   
  * Option to acquire Oriental Mining S.a.r.l. and its exploration licences in
    Madagascar exercised;
   
  * Appointment of Ian Harebottle as new CEO; and
   
  * Turmoil in the general diamond and gemstone sector, with significant demand
    and price reductions widely reported.
   
Key developments since the end of the period:

  * Two successful rough emerald auctions conducted during July and November
    2009 with sales totalling US$11.5 million;
   
  * The initiation of co-operative global emerald marketing and promotion; and
   
  * Illegal mining activity taking place within the Kagem mining licence area
    being addressed.
   
Strategic Review

Given the turmoil in the world markets, Gemfields initiated a strategic review
of its group-wide operations. This result was a focus on:

  * reducing operating costs;
   
  * improving operating efficiencies; and
   
  * delivering world class rough emerald supply - the key here being the
    sustainable supply of larger volumes of well graded, high quality emeralds
    to targeted stakeholders.
   
We have shown good progress in these areas and have managed to achieve some
encouraging results.

While Gemfields' performance has been, and is likely to continue to be,
significantly lower than projected at the time of readmission to AIM in June
2008, the goal now is to establish a solid base that will be able to support
future growth and profitability as our operating environments improve.

Operations

  * Mining - Kagem
   
The Kagem emerald mine in Zambia is presently Gemfields' only operating emerald
mine, and serves as the source of emeralds for our downstream business. Given
the decline in global demand for diamonds and other gemstones, Gemfields took
the decision to reduce the scale of mining at Kagem. During the year, operating
costs averaged US $241 per tonne of ore (known as "Reaction Zone") compared to
$447 per tonne in 2008. In addition, and until the prospects for a full
recovery in the gemstone market are more certain, Gemfields will continue to
limit its capital, project development and exploration expenditure to key
projects only.

Despite the reduction in the scale of operations, Kagem was able to show some
progress during the year:

  * 28.0 million carats of emerald and beryl were produced. For the year ended
    30 June 2008, production totalled 9.9 million carats;
   
  * 80,282 tonnes of Reaction Zone was mined at an average of 6,690 tonnes per
    month. For the year ended 30 June 2008, ore production totalled 42,336
    tonnes at an average of 3,528 tonnes per month;
   
  * This resulted in an implied ore grade of 349 carats per tonne for the year
    ended 30 June 2009 compared to a grade of 233 carats per tonne for the year
    ended 30 June 2008.
   
Kagem's key annual production parameters are summarised below:

KAGEM Annual Production Units     Yr to 30    Yr to 30    Yr to 30    Yr to 30  
Summary                           Jun 06      Jun 07      Jun 08      Jun 09    
                                                                                
Gemstone Production     million   10.2        9.4         9.9         28.0      
(Emerald + Beryl)       carats                                                  
                                                                                
Ore Production          `000      22          29          42          80        
(Reaction Zone)         tonnes                                                  
                                                                                
Grade (Emerald + Beryl/ carats/   462         325         233         349       
Reaction Zone)          tonne                                                   
                                                                                
Waste Mined (including  million   1.8         2.8         5.1         4.0       
TMS)                    tonnes                                                  
                                                                                
Stripping Ratio                   83          96          120         50        

Prior to Gemfields' involvement at Kagem, total rock handling capacity was
approximately 200,000 tonnes per month. This was scaled up to 600,000 tonnes
per month by the beginning of the year under review. This increase in the scale
of operations was achieved through the introduction of contract mining, an
increase in the size and quality of the in-house fleet, improvements to the
mine's on-site maintenance capacity, improved haulage systems and a focus on
increasing efficiency across all levels of operations, including security and
human resources.

By the second financial quarter of 2009 the rock handling capacity had been
scaled down to around 300,000 tonnes per month and to 200,000 tonnes per month
by the third and fourth financial quarters of the year. These reductions were a
direct result of the prevailing global economic conditions. However, ore mining
performance was maintained at 6,690 tonnes per month throughout the year (up
from around 2,000 tonnes per month prior to Gemfields' involvement at Kagem).
This increase in the volume of actual ore mining was made possible by
fine-tuning the sequence of ore and waste mining, and through the introduction
of various mechanised methods including mechanical chisels and rock splitters.

During the year, Kagem's operating cost averaged US$241 per tonne of ore (i.e.
"Reaction Zone") and US$0.69 per carat (counting both emerald and beryl
production) with mining efficiencies continuing to show an improving trend
during the period.

  * Geology and exploration
   
In November 2007, Kagem embarked on a comprehensive exploration programme with
completion planned for March 2009. The programme included 15,000 metres of core
drilling, associated geochemical analysis and a high-resolution airborne
geophysical survey. The objectives of the project included:

  * augmenting the ore resource along 1.8 km of the Fwaya-Fwaya belt to a
    vertical depth of 150 metres from surface;
   
  * improving the geological and structural understanding in two of the
    remaining five known TMS belts that exist on the Kagem licence area and to
    establish their potential inferred ore resource;
   
  * various geochemical studies aimed at developing a `Fertility Index' as a
    possible quantitative and advance guide to emerald mineralisation; and
   
  * delineating other possible exploration targets within the licence area by
    identifying potential TMS/pegmatite contact zones through high resolution
    airborne magnetic and radiometric surveys.
   
The aim was to establish sufficient ore resources, of dependable confidence
levels, to support Kagem's targeted expansion plans and to support long term
life-of-mine planning.

A total of 14,390m of exploratory drilling was completed in the Fwaya-Fwaya and
Dabwisa belts by December 2008 with the high resolution geophysical survey
being completed in March 2009. Early results are reasonably encouraging and
have indicated a number of potential target sites for additional work and the
expansion of mining operations.

  * Security
   
The security department has initiated various upgrades during the period,
including:

  * fencing of the entire camp perimeter, electrified-fencing of the sort-house
    and treatment plant and the installation of CCTV cameras in the latter two
    areas;
   
  * new standard operating procedures covering searching, dress codes, fuel
    handling, armoury, gate procedures and pit security;
   
  * the securing of Kagem's boundaries; and
   
  * the deployment of State Police Officers in selected areas across the mining
    licence to help in reducing illegal mining within the area.
   
While these security initiatives have begun to show some positive results, the
reduction of theft and securing of the mining licence area will remain ongoing
focal points during the coming year. Some additional projects are being
considered for the coming year and include the possible acquisition of x-ray
body scanners and ongoing improvements to the sort-house, treatment plant and
in-pit production areas.

In September 2009, a company called Bisma Investments Limited initiated illegal
mining activities within the Kagem licence area, purportedly under a mining
licence granted by the Director of Mines Development in Zambia on 7 August
2009. The Director of Mines has since written to these parties to direct them
to cease their current illegal actions and has revoked their licence. Efforts
to have them removed from the Kagem licence are ongoing.

  * Sales and Inventories
   
Gemfields has elected to offer its rough production to the market by way of
closed tenders (auctions) where all material offered is certified by Gemfields
as natural, untreated and of Zambian origin. Many of the world's top gem houses
and emerald lapidaries are invited to attend these events.

Since the balance sheet date, Gemfields has hosted two emerald auctions during
July and November 2009. Some thirty companies drawn from Germany, India, Israel
and the USA attended these events which saw 2.51 million carats of emerald
offered in 46 separate lots. The sales from these tenders totalled US$11.5
million, with 40 of a total of 46 lots put on offer at the combined events
being sold.

An auction of lower quality rough emerald and beryl is expected to be held in
Jaipur, India during the first quarter of 2010. Significant interest to attend
this auction is clearly evident from all key stakeholders.

Despite improving market conditions and early sales successes, Gemfields has
opted to take a conservative approach in terms of estimating the possible net
realisable value of its rough and polished emerald inventory.

The Directors have used the prices achieved in the July 2009 auction as the
basis for the net realisable value of the remaining rough emerald stock. The
internal valuation of the net realisable value of Gemfields' cut and polished
emerald inventory has been estimated using the estimated value of the rough
material consumed, plus the physical costs of cutting and polishing.

While market volatility prevails and demand and prices continue to be somewhat
erratic, the actual value realised at the time of sale has the potential to
differ significantly (either positively or negatively) from the estimated value
provided here by the Directors.

  * Marketing and Promotions
   
Gemfields is positioned at the forefront of the gemstone industry and intends
to play an active part in promoting the value and importance of natural
untreated gemstones that have followed a transparent and ethical route from
mine to market. A small but focused marketing division has been established
within the group and is headed up by Ms. Anna Haber and Mr. Rupak Sen, both of
whom have many years of experience and are well recognised within the gemstone
industry. Anna will lead the division and will focus her efforts on the
European and American markets while Rupak will head up the Group's Middle
Eastern and Asian marketing initiatives. The Company plans to partner with
selected retailers, encouraging them to sell, market and promote Gemfields'
emeralds. These retailers will be supported through high-level introductions to
Gemfields' preferred emerald manufacturing partners, ensuring that they are
able to have access to a consistent and reliable supply of quality emeralds.

  * Environment and Corporate Social Responsibility
   
The Company operates in compliance with international environmental and safety
standards. This is evidenced by Kagem having been upgraded from category C to
category B in the Environmental Council of Zambia's (ECZ) inspection for
renewal of statutory licences and the Environmental Protection Fund's (EPF)
annual environmental audit reports.

The Zero Carbon Project

Kagem embarked on a "Zero Carbon Project" in March 2009 involving the planting
of circa 300,000 trees to neutralise the effect of emissions. To date 7,150
trees have been planted.

Corporate Social Responsibility

Gemfields is committed to investing in sustainable community development
projects. Such projects are developed in partnership with the local people
living in close proximity to our operations and include the building and
equipping of schools and medical clinics and the development of local farming
projects. A project team has been established to ensure that all social
projects are undertaken in the best interests and with the support of the
relevant community.

  * Impairment
   
The Directors have taken the decision to write down the value of Kagem to zero
in the financial statements. The ongoing uncertainty in the global economy, the
loss-making performance during the year and the lack of reliable emerald prices
make it difficult to justify forecasts showing a positive cashflow with
reasonable certainty. This in turn complicates valuing the mine. The Company
remains optimistic that Kagem will become a viable operation over time and
recognises that much of the value proposition will be derived from trading,
marketing and other aspects of the downstream business and, accordingly,
believes the decision to write down the mine itself to be justifiable in the
current climate.

  * Kariba Amethyst Mine
   
Production at the Kariba amethyst (of which Gemfields owns 50%) has continued
at modest levels throughout the year. Critically, the privatisation agreement
to purchase a further 26% of Kariba still remains unsigned by the Government of
Zambia. The Company hopes to resolve the future ownership of Kariba during the
coming year. Gemfields remains optimistic that production could be improved but
will not commit any additional funds to expanding Kariba until the matter of
ownership is resolved.

Key financial performance indicators

                                                            2009           2008
                                                                               
Share price                                                £0.06          £0.38
                                                                               
Cash and cash equivalents                           US$6,868,789  US$48,078,023
                                                                               
Emerald inventory                                  US$17,715,627   US$6,789,231
                                                                               
Revenue from emerald sales                            US$815,456              -
                                                                               
Loss for the year                                 US$201,407,565 US$30,208,361 

Result

The result for the year is significantly and adversely affected by the
impairment charge relating to Kagem.

Given the policy of inventory building adopted prior to the onset of the global
financial crisis (which was aimed at establishing a base from which to provide
customers with a reliable and consistent source of supply), no emerald sales of
any significance took place during the period.

Fabergé Licence

The Company completed the arrangements granting it an exclusive worldwide
licence to use the Fabergé brand name in respect of coloured gemstones
(excluding diamonds).

The licence, granted pursuant to an option which Gemfields acquired in June
2008, covers an initial 15 year term.

Oriental Mining S. a. r. l.

The Company exercised its option to acquire the entire issued share capital of
Oriental Mining s.a.r.l., a company incorporated in Madagascar ("Oriental").
Gemfields was granted the option by Rox Limited ("Rox") pursuant to an
agreement between Gemfields and Rox dated 18th December 2007.

Oriental has the rights to 15 exploration licences covering emeralds, rubies,
sapphires, tourmalines and garnets in the Antananarivo, Fianarantsoa and
Toliara provinces of Madagascar. In addition, Oriental has the right to five
exploration licences that are pending approval from the Madagascan Ministry of
Energy and Mines.

Madagascar is recognised as one of the most exciting colour gemstone provinces
in the world today, with several key discoveries having been made there during
the last decade. While the country is presently experiencing considerable
political turmoil, the Company believes that, in the medium to long term,
gemstone-related activity in the country has the potential to become a valuable
part of Gemfields' asset portfolio.

Tanzanite One Limited

Gemfields announced details of a proposed offer for Tanzanite One Limited
("T1") on 12 September 2008. A successful bid would have created an enlarged
gemstone group with both open-cast and underground gemstone mining expertise,
positioning the combined group well for future consolidation, and benefitting
from synergies in processing, sales, branding and marketing.

Gemfields began a stakebuilding exercise in T1 during the year. The exercise
saw Gemfields purchase 11,668,330 shares in T1 (approximately 16 per cent.).
This was funded by the placing of 14,712,143 new Gemfields shares at a price of
29p per share to Rox Limited.

The stakebuilding exercise culminated in a "first come first served" tender
offer for 30,754,970 T1 shares on 21 October 2008. The offer was oversubscribed
within four days of its announcement. The T1 board responded by issuing new T1
shares (constituting more than 50% of the enlarged voting share capital) to a
T1 subsidiary. This prevented Gemfields from acquiring a controlling stake in
T1 and the offer was thus allowed to lapse. Gemfields currently has no
intention of making any revised or further offer for T1.

Appointment of New CEO

Ian Harebottle, a veteran of the coloured gemstone industry, was appointed as
CEO during the year.

Name Change

The Company changed its name from Gemfields Resources Plc to Gemfields Plc
during the year.

Outlook and Objectives for the year ahead

Objectives:

  * Building on the solid rough sales platform that has been established and
    which is showing encouraging signs for further growth.
   
  * Initiating Gemfields' sales programmes for polished and certified
    gemstones.
   
  * Expanding mining and exploration activities to include new target sites
    within the Kagem mining licence area.
   
  * A focus on improved and upgraded security across the mine site supported by
    skilled manpower and additional capitalisation.
   
  * Subject to the necessary Zambian consents, the opening of a rough gemstone
    trading business in Kitwe, Zambia (aimed at purchasing rough emeralds from
    local and small scale operators).
   
  * The establishment of a trial cutting facility on the mine to establish the
    feasibility of local beneficiation.
   
Outlook:

  * The mine plan presently being implemented at Kagem aims to continue the
    current trend of improving mining efficiencies, further reducing relative
    operating costs and targeting higher grade areas in pursuit of optimising
    financial performance. The scale and possible expansion of the mine plan
    will be re-assessed as operating conditions improve.
   
  * The Company plans to actively pursue its strategy of consolidating the
    supply chain and improving consumer awareness and demand high quality,
    certified and transparent rote to market coloured gemstones. It is hoped
    that these efforts will increase demand for the Company's products, thereby
    supporting an increase in prices and achievable margins.
   
  * The Company is not expecting any significant growth within the coming year
    and will view this time as an opportunity to cement its current business
    platform in preparation for future growth.
   
Graham Mascall

4 December 2009

Gemfields PLC

Consolidated income statement

for the year ended 30 June 2009

                                         Note                2009          2008
                                                                               
                                                          US$'000       US$'000
                                                                               
Revenue                                                       815             -
                                                                               
Mining and production costs                3              (6,316)       (3,024)
                                                                               
                                                         ________      ________
                                                                               
Gross Loss                                                (5,501)       (3,024)
                                                                               
Other income                                                  246           739
                                                                               
Administrative expenses                                                        
                                                                               
Impairment                                27            (254,932)      (19,500)
                                                                               
Depreciation                              10             (14,743)       (3,002)
                                                                               
Other administrative expenses                             (8,213)       (6,370)
                                                                               
Total Administrative expenses                           (277,888)      (28,872)
                                                                               
                                                         ________      ________
                                                                               
Loss from operations                       4            (283,143)      (31,157)
                                                                               
                                                         ________      ________
                                                                               
Finance income                             6                1,423           935
                                                                               
Finance expenses                           6              (9,358)         (419)
                                                                               
                                                         ________      ________
                                                                               
Loss before taxation                                    (291,078)      (30,641)
                                                                               
                                                         ________      ________
                                                                               
Tax credit                                 7               89,670           433
                                                                               
                                                         ________      ________
                                                                               
Loss for the year                                       (201,408)      (30,208)
                                                                               
                                                         ________      ________
                                                                               
Attributable to:                                                               
                                                                               
Equity shareholders of the parent                       (164,757)      (29,330)
                                                                               
Minority interest                                        (36,651)         (878)
                                                                               
                                                         ________      ________
                                                                               
                                                        (201,408)      (30,208)
                                                                               
                                                         ________      ________
                                                                               
Loss per share                                                                 
                                                                               
Basic and diluted                          8            US$(0.51)     US$(0.25)
                                                                               
All amounts relate to continuing                                               
activity.                                                                      

Gemfields PLC

Consolidated statement of changes in equity

for the year ended 30 June 2009

                 Attributable to equity holders of the parent                                      
                                                                                                   
                                                  Cumulative                                       
                                                                                                   
                   Share   Share  Merger  Option Translation  Retained     Total Minority          
                                                                                                   
                 capital premium Reserve Reserve   Reserve    Earnings           Interest    Equity
                                                                                                   
                   $000s   $000s   $000s   $000s       $000s     $000s     $000s    $000s     $000s
                                                                                                   
Balance at 30      1,871  33,776  10,500     858         (7)  (14,268)    32,730        -    32,730
June 2007                                                                                          
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Loss for the           -       -       -       -           -  (29,330)  (29,330)    (878)  (30,208)
year                                                                                               
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Total recognised       -       -       -       -           -  (29,330)  (29,330)    (878)  (30,208)
income                                                                                             
                                                                                                   
and expense for                                                                                    
the year                                                                                           
                                                                                                   
Issue of new       4,033  55,910 110,505       -           -         -   170,448        -   170,448
share capital                                                                                      
(net of issue                                                                                      
costs)                                                                                             
                                                                                                   
Share based            -       -       -     283                     -       283        -       283
payments                                                                                           
                                                                                                   
Options expired        -       -       -    (30)           -        30         -        -         -
                                                                                                   
Minority               -       -       -       -           -         -         -   37,529    37,529
interest                                                                                           
resulting from                                                                                     
acquisition                                                                                        
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Balance at 30      5,904  89,686 121,005   1,111         (7)  (43,568)   174,131   36,651   210,782
June 2008                                                                                          
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Loss for the           -       -       -       -           - (164,757) (164,757) (36,651) (201,408)
year                                                                                               
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Total recognised       -       -       -       -           - (164,757) (164,757) (36,651) (201,408)
income                                                                                             
                                                                                                   
and expense for                                                                                    
the year                                                                                           
                                                                                                   
Issue of new         256   7,137       -       -           -         -     7,393        -     7,393
share capital                                                                                      
(net of issue                                                                                      
costs)                                                                                             
                                                                                                   
Share based            -       -       -   1,321           -         -     1,321        -     1,321
payments                                                                                           
                                                                                                   
Options expired        -       -       -   (228)           -       228         -        -         -
                                                                                                   
                    ____ _______  ______  ______    ________   _______     _____  _______     _____
                                                                                                   
Balance at 30      6,160  96,823 121,005   2,204         (7) (208,097)    18,088        -    18,088
June 2009                                                                                          
                                                                                                   
                  ____   ______  ______  ______     ________    ______     _____  _______     _____
                                                                                                   

The nature and purpose of each reserve within Shareholders' equity is described
as follows:

Reserve Description and purpose

Share capital Amount subscribed for share capital at nominal value.

Share premium Amount subscribed for share capital in excess of nominal value.

Merger reserve The difference between the fair value of the shares issued as
consideration for acquisition of subsidiaries in excess of the nominal value of
the shares, where 90% or more of shares are acquired.

Option reserve Cumulative fair value of options charged to the income
statement.

Cumulative translation reserve Cumulative gains and losses on retranslating the
net assets of overseas operations to the presentation currency.

Retained earnings Cumulative net gains and losses recognised in the
consolidated income statement.

Minority interest Amounts attributable to non-controlling shareholders.

Gemfields PLC

Consolidated balance sheet

at 30 June 2009

                                         Note                2009          2008
                                                                               
                                                          US$'000       US$'000
                                                                               
Non-current assets                                                             
                                                                               
Intangible assets                          9                    -             -
                                                                               
Property, plant and equipment             10                5,993       268,663
                                                                               
Available-for-sale Investments            12                2,430             -
                                                                               
                                                         ________      ________
                                                                               
                                                            8,423       268,663
                                                                               
                                                         ________      ________
                                                                               
Current assets                                                                 
                                                                               
Inventory                                 13               18,445         7,500
                                                                               
Other receivables                         14                1,620         1,151
                                                                               
Cash and cash equivalents                                   6,869        48,078
                                                                               
                                                         ________      ________
                                                                               
Total current assets                                       26,934        56,729
                                                                               
                                                         ________      ________
                                                                               
Total assets                                               35,357       325,392
                                                                               
                                                         ________      ________
                                                                               
Non-current liabilities                                                        
                                                                               
Deferred taxation                         18              (1,134)      (90,827)
                                                                               
Other non-current liabilities             15              (7,848)      (17,039)
                                                                               
                                                         ________      ________
                                                                               
                                                          (8,982)     (107,866)
                                                                               
Current liabilities                                                            
                                                                               
Trade payables                            17              (2,640)       (2,275)
                                                                               
Current tax                               17                 (23)         (329)
                                                                               
Other current liabilities                 17              (5,624)       (4,140)
                                                                               
                                                         ________      ________
                                                                               
                                                          (8,287)       (6,744)
                                                                               
                                                         ________      ________
                                                                               
Total liabilities                                        (17,269)     (114,610)
                                                                               
                                                         ________      ________
                                                                               
                                                         ________      ________
                                                                               
Total net assets                                           18,088       210,782
                                                                               
                                                         ________      ________
                                                                               
Capital and reserves attributable to                                           
equity holders of the parent                                                   
                                                                               
Share capital                             19                6,160         5,904
                                                                               
Share premium                                              96,823        89,686
                                                                               
Merger reserve                                            121,005       121,005
                                                                               
Option reserve                                              2,204         1,111
                                                                               
Cumulative translation reserve                                (7)           (7)
                                                                               
Retained earnings                                       (208,097)      (43,568)
                                                                               
                                                         ________      ________
                                                                               
                                                           18,088       174,131
                                                                               
Minority interests                                              -        36,651
                                                                               
                                                         ________      ________
                                                                               
Total equity                                               18,088       210,782
                                                                               
                                                         ________      ________

Gemfields PLC

Consolidated cash flow statement

for the year ended 30 June 2009

                                          Note               2009          2008
                                                                               
                                                          US$'000       US$'000
                                                                               
Cash flows from operating activities                                           
                                                                               
Loss for the year                                       (201,408)      (30,208)
                                                                               
Depreciation                               10              14,743         3,002
                                                                               
Impairment of intangible assets             9                   -        12,514
                                                                               
Impairment of evaluated mining            10,27           249,731             -
properties                                                                     
                                                                               
Impairment of available for sale assets    27               5,201             -
                                                                               
Share-based payments                                        1,321           283
                                                                               
Finance income                                            (1,423)         (935)
                                                                               
Finance expense                                             9,358           419
                                                                               
Tax credit                                               (89,670)         (433)
                                                                               
Impairment of property, plant and          10                   -         6,708
equipment                                                                      
                                                                               
Inventory provision                                             -           278
                                                                               
(Increase)/Decrease in trade and other                      (469)           136
receivables                                                                    
                                                                               
Increase/(Decrease) in trade and other                    (1,881)      (13,343)
payables                                                                       
                                                                               
Increase/(Decrease) in provisions                           (802)         5,050
                                                                               
(Increase) in inventory                                  (10,945)       (2,159)
                                                                               
                                                         ________      ________
                                                                               
Net cash outflow from operating                          (26,244)      (18,688)
activities                                                                     
                                                                               
Cash flows from investing activities                                           
                                                                               
Acquisition of investment                                       -          (22)
                                                                               
Acquisition of available for sale          12             (7,631)             -
investment                                                                     
                                                                               
Interest received                                             974           260
                                                                               
Dividend received                                             449             -
                                                                               
Purchase of property, plant and            10             (2,338)         (737)
equipment                                                                      
                                                                               
Sale of property, plant and equipment      10                 534             -
                                                                               
Purchase of intangible assets                                   -          (50)
                                                                               
Exploration and development expenditure                         -           (3)
                                                                               
                                                         ________      ________
                                                                               
Net cash outflow used in investing                        (8,012)         (552)
activities                                                                     
                                                                               
Cash flows from financing activities                                           
                                                                               
Issue of ordinary shares (net of issue                      7,360        57,227
costs)                                                                         
                                                                               
Exercise of share options                                      33             -
                                                                               
Repayment of borrowings                                   (4,986)              
                                                                               
Finance expense                                             (653)         (419)
                                                                               
                                                         ________      ________
                                                                               
Net cash inflow from financing                              1,754        56,808
activities                                                                     
                                                                               
Net (decrease)/increase in cash and                      (32,502)        37,568
cash equivalents                                                               
                                                                               
Cash and cash equivalents at start of                      48,078         9,836
period                                                                         
                                                                               
Exchange differences on translation                       (8,707)           674
                                                                               
                                                         ________      ________
                                                                               
Cash and cash equivalents at end of                         6,869        48,078
period                                                                         
                                                                               
                                                         ________      ________
                                                                               



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